Bank holding company (formerly a BDC) NewTekOne (NEWT) has announced they will be selling a new baby bond.
The company has numerous baby bonds already outstanding which can be seen here.
While the use of proceeds statement does specify it NEWT has a baby bond issue maturing on 8/1/2024, it is minor as they already partially redeemed the issue.
The new bond will trade under ticker NEWTG when it is priced and begins trading–maybe next week.
The preliminary prospectus can be found here.
Thanks to J for noting this one.
These are subordinated notes, not senior debt with no asset to back up the pledge. Just a promise to pay . Another BDC…
Little 330M market cap micro bank holding company , with 83% debt to assets ratio and 6% inside ownership with an interest coverage ratio of 2X’s. Not bad but on the edge with its debt.
On the equity side NEWT has a Dividend Payout Ratio of approx 40%, so it can handle its 5% dividend…
Tempting as they currently have a 2028 BB’s at 8%, interesting to see what this one will be?
NEWT – one things for sure, that new bond doesn’t have the 150% asset coverage requirement like their old BDC notes did.
https://www.bamsec.com/filing/158798722000103/1?cik=1587987&hl=7440:7823&hl_id=417jjxvqxe
Not did, X, DO! They still have it according to the 10k, but of course NEWT makes no mention of it in this prospectus…. It makes no sense to me that it’s not mentioned because theoretically, as long as NEWTL and NEWTZ remain outstanding NEWT is bound to abide by the 150% asset coverage ratio on pari passu debt. And PaydayInvestor, these are NOT subordinated debt. https://investor.newtekbusinessservices.com/node/19151/html they are described as “fixed rate senior notes” due 2029.
And of course, don’t ask them what the current asset coverage ratio is, you’ll not get an answer….. All you’ll get out of NEWT is a generalized statement saying they are in full compliance with all covenants…..
See their 10Q https://www.sec.gov/ix?doc=/Archives/edgar/data/0001587987/000158798724000082/newt-20240331.htm p. 68
“The Base Indenture, and each supplemental indenture thereto, contains certain covenants. The Base Indenture provides for customary events of default and further provides that the Trustee or the holders of 25% in aggregate principal amount of the outstanding Notes may declare such Notes immediately due and payable upon the occurrence of any event of default after expiration of any applicable grace period. Each supplemental indenture (except for the Tenth Supplemental Indenture) includes covenants requiring the Company to comply with (regardless of whether it is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act (or any successor provisions), to comply with (regardless of whether it is subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the Notes and the Trustee if the Company should no longer be subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the Base Indenture, as supplemented by each supplemental indenture thereto. These covenants currently apply to the 2024 and 2026 Notes. At March 31, 2024, the Company was in compliance with all covenants related to the Notes.”
I was waiting for 2WR to respond. How much are you going to be buying of these?
yes, I didn’t mean to imply the older notes didn’t have that language, just that it was missing in the new issue and therefore the new issue might be less well protected / subject to higher bank leverage in the future if/when they might redeem the older ones that (supposedly) force them to maintain those older BDC coverage ratios.
Well worded, x. especially the inclusion of “(supposedly)”. It still bothers me that they don’t say anything in this new prospectus that says or implies that they remain limited to 150% asset coverage ratio across the board at the holding company level just as long as L and Z remain outstanding. To me it’s meaningful and if “supposedly” wasn’t so darn accurate, you would think it ought need to be disclosed…
And Charles, despite my ongoing mistrust on this topic, I have no concern about their ability to service senior notes. Otherwise I wouldn’t have remained involved in Z and L. Call it stubborness or whatever you want, I will not be either buying or swapping into it from these two no matter what the spread… Yes, I realize, I’m being irrational…..
No, what I meant was would you be buying some of the new notes?
I thought I answered that – “I will not be either buying or swapping into it….” But I will speculate that the issue will be priced much better than 8.5% if that’s the talk…. I also wonder what the size of the issue will end up being? I think it’d have to be $150mil to redeem NEWTL and call Z…… Hope springs eternal, but I am not trying to imply I think it will happen…………
NEWTZ getting a nice little bounce today.
NEWTZ traded 100 meaningless shares
Hi, isn’t newt a bank now?…it converted..
It’s a bank now